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Consumer Portfolio Services this month issued its third securitization of the year backed by $168.8 million in auto loan receivables, and this latest issuance features “significant changes” from the company’s earlier notes, according to a pre-sale report from S&P Global Ratings.
One of the most significant changes includes the addition of more of CPS’ high-credit tier loans to the pool.
CPS’ top four credit tiers comprised 79.4% of the collateral up from 73.6% in the 2018-B issuance, according to S&P. The percentage of loans originated under CPS’ three lower credit tiers decreased to 20.6% compared with 26.4% in the prior issuance.
“It’s true that we have gradually made a shift to the upper tier of our product mix,” Jeffrey Fritz, executive vice president and chief financial officer of CPS, told Auto Finance News. “Part of that is we’ve given some pricing advantages to the dealer for lower LTV loans, and for newer vehicles and that has tended to shift the mix in our credit spectrum toward the upper tier.”
This issuance is also notable because 11.4% of the loans are made up of called collateral, which are loans that were offered in prior securitizations but have since been repurchased by the company. In this case, the loans are from three 2013 issuances. When those 2013 bonds amortized to 10% of the original pool, CPS re-acquired the remaining collateral as it usually does and is now securitizing those performing loans again.
“The called collateral is very seasoned because it’s probably four to five years old — most of the losses have already occurred,” Fritz said. “Because the called collateral is seasoned, the remaining life of those balances is materially less, and it tends to bring down the expected life of the whole portfolio, shifts the yield curve down, and can have a positive effect on the credit spread execution of the deal.”
The securitization is expected to close on July 17 and is the lenders largest pool of securitized loans since at least 2016, as the company has continually increased the size of the issuances, according to the report.